The Association between Audit Business Scale Advantage and Audit Quality of Asset Write-downs

This paper examines whether the scale advantage of auditing firms can be used as an alternative indicator of audit quality when the evaluation of audit quality is costly. The adoption of asset impairment recognition in China has brought about a considerable impact on financial reporting of Chinese listing companies in recent years. This new accounting practice provided a special environment, which was subjected to less endogeneity problems than usual, to test the relationship between the scale of auditing business and audit quality. Prior research reported empirical evidence that both market value and firm characteristics are empirically related to write-downs, reflected in the four dimensions return relevance, price relevance, persistence and determinant. Using these four dimensions, we investigated whether audit business scale advantage(ABSA) affect audit quality of asset write-downs. We contribute to the literature with the following findings. First, auditors' business scale is positively related to return relevance of write-downs. Second, auditors with ABSA not only enhance the relevance between impairments and economic variables but also weaken the relation between impairments and managerial variables; however, the results appear in only a few of the firm-specific variables. Third, results are mixed when we test the ABSA effect on price-relevance and persistence dimensions. Fourth, the ABSA effect is stronger when the complexity of asset write-downs requires some inside information to comprehend the nature of action. Adding to the main finding, we also found the ABSA effect became weaker when we proxy ABSA with raw data of companies' business scale instead of the top five auditors in business scale. Taken together, our results show that the ABSA effect does exist in auditing of assets write-downs, although with weak evidence. Our results also indicated rational auditor choice based on quality of service in China's audit market. We identified some unique factors from stakeholders' cooperative structuring actions in China audit market as potential explanations to the market rationality.

Address forms in Chinese audit opinions

Although forms of address are widely used in textual and other types of disclosure,empirical evidence of their effects is rare.China provides a unique setting in which to test the economic consequences of the forms of address used in audit reports.From 2003 to 2011,about 60%of auditors surveyed addressed their clients by their real names in audit opinions,while the others used honorifics.Based on a sample of Chinese audit opinions,I report the following findings.First,the announcement of an audit opinion that uses the client’s real name elicits a greater market response than the announcement of an opinion featuring an honorific form of address.Second,the effects of real-name forms of address are stronger in firms with weak board governance.Third,the association between audit fees and audit risk factors,such as loss-making,is stronger in firms that are addressed by their real names in audit reports.I conclude from these findings that the forms of address used in audit opinions may reveal private information on audit quality.The results of this study are consistent with the power-solidarity effect described by sociolinguists.

Structure basis for the unique specificity of medaka enteropeptidase light chain

Dear Editor, Enteropeptidase （enterokinase, EC 3.4.21.9） is a serine protease, which shows a specific cleavage of its substrates at the C-terminal of the recognition site （Asp）4Lys （Zheng et al., 2009）. Because of the unique specificity, enteropep- tidase could be used as a tool for the production of recom- binant fusion proteins. Especially the recombinant enteropeptidase light chain （EPL）, which contains a catalytic domain, is of large interest to be applied in biopharmaceu- tical industry （Lu et al., 1997）.